High Irish GDP is an illusion, Ireland is not that rich

Peregrinus

https://www.boards.ie/discussion/comment/120873388#Comment_120873388

Nope. This isn't a simple binary — either Irish GDP is exactly as relevant as the GDP of another country, or it has no relevance at all. The relevance of Irish GDP can't be assessed without first asking "relevance to what?"

As already pointed out, Irish GDP is relevant in relation to tax; we do collect significant tax revenue from the element of our GDP that some dismiss as fictional. So while GDP doesn't tell us as much about living standards in Ireland as it would in most other countries, it does tell us rather more about our capacity to raise revenue. Which, in relation to our capacity to service public debt, is the key issue.

Stephen_Maturin

https://www.boards.ie/discussion/comment/120873180#Comment_120873180

No but that’s the problem, it’s now at the point where it is unusual - home ownership has collapsed amongst under 40s. Many are leaving, but unlike previous generations this time many will never come back. They have no prospect of being able to buy a home and build a life in Ireland.

Perhaps it’s not a lack of empathy among older generations as much as it a lack of understanding of the current situation. They think “sure we had to leave too at one time” but it’s not the same.

My own parents emigrated at the end of the eighties and returned 7 years later. The difference was back then, when they returned there was ample housing supply at FAR more affordable rates and far more access to finance. The house they bought ~25 years ago is now worth 5 times what they paid for it. 5 TIMES, 500% growth in value in that period of time. You’ll see the same story all over the country. Have wages grown by 500% in that time period? Not in the slightest. I have a very good job that pays higher relative to what my parents earned back then and yet I still wouldn’t have a hope in hell of buying a house in the same county I grew up in, much less the same area. It’s depressing.

https://www.irishtimes.com/business/2023/07/20/ireland-has-one-of-lowest-rates-of-home-ownership-for-under-40s-esri-says/

”Close to 80 per cent of people over the age of 40 in Ireland own their home, according to the report published by the Economic and Social Research Institute (ESRI), yet barely a third of adults younger than 40 are homeowners. Home ownership has collapsed among adults of prime working age – 25-39 year olds – from 22 per cent in 2011 to 16 per cent in 2016, and to an estimated 12 per cent in 2021.

More than a quarter of 25-34 year olds here still lived with their parents during the period covered by the study, while Ireland had the lowest share of single adults under the age of 40 living outside their parents’ home.”

Older people don’t like the idea of admitting that maybe they actually had it easier than the young adults of today when it comes to securing a home. I think that’s why we see so much of the hand waving “Oh we had it tough too” minimisation of this crisis.

It’s also not a coincidence most of our politicians are from that generation and also find themselves sitting pretty on an asset that has grossly bloated in value and no interest in their descendants being able to achieve the same.

timmyntc

https://www.boards.ie/discussion/comment/120873439#Comment_120873439

Seeing as much of our FDI related increase in GDP is predicated on low (or no), corporation taxes, it is an inaccurate metric wrt our ability to service debts.

GDP is not a measure of revenue.

https://www.boards.ie/discussion/comment/120873180#Comment_120873180

We didn't export our qualified tradies or degree educated workforce. We exported labourers, in the main.

This country is spending millions educating a generation which is leaving to use that education in foreign countries.

Peregrinus

https://www.boards.ie/discussion/comment/120873543#Comment_120873543

GDP is a measure of revenue capacity; that's why debt/GPD ratios and tax/GDP ratios are so widely discussed.

As already pointed out in this thread, despite (or even because of) our low Corporation Tax rates, we do in fact collect a lot of Corporation Tax.

In the UK, CT receipts are 3.8% of GDP. But in Ireland, CT receipts are 4.5% of (grossly inflated) GDP, or 8.3% of GNI*. Of course, much of this surprisingly large CT revenue comes from corporate profits which are diverted to Ireland precisely in order to be taxed here. So our GDP, comprised to a significant extent of corporate profits brought to Ireland so as to be within the Irish tax regime, does indeed point to tax capacity.

Lenders understand this. That's why Ireland has the credit rating that it does, and why people bleating about "leprechaun economics" have, on this particular point, misunderstood the situation.

https://www.boards.ie/discussion/comment/120873514#Comment_120873514

In this article they discuss accommodation costs vs take home.

I would love to see the breakdown in the over 40s (generally low mortgage payments) vs generation rent coming behind us.

They say that Ireland is not extreme in its accommodation but I really feel that is being cushioned by the high percentage of home owners over 40 Vs the under 40s with astronomical rents and ever rising mortgages

Dohnjoe

https://www.boards.ie/discussion/comment/120873388#Comment_120873388

The obvious answer is that Ireland is a relatively well-off country (on aggregate) but some want to play with numbers in order to project something else.

Can't have it both ways (also can't move for luxury SUVs on the road)

Sam Russell

The current housing problem is the result of the Gov failing for the last 50 years to build social subsidised housing to any extent. Instead the issue was privatised to the private rental market - and subsidized by the Gov latterly.

Add to that the changes in social fabric where family breakdowns have increased the need for social housing. One family of father, mother and a few kids becomes two families, or, alternatively, a single person and single parent with kids. This usually means one or both segments of this go from being able to afford their own housing to one or both falling into the requirement for social housing.

Add to that, the continued increase in house prices caused by the shortage of stock and construction has caused the under forties cohort being unable to afford to buy - or to rent. Hence, the numbers staying with parents in the hope of saving enough to afford a house.

It is not a problem that can be solved quickly, or well.

WesternZulu

https://www.boards.ie/discussion/comment/120871352#Comment_120871352

A tiny minority of people have more than one job never mind three!

Flinty997

https://www.boards.ie/discussion/comment/120873717#Comment_120873717

This is true. But there is a divide that's getting wider. Especially in the "middle" classes.

Flinty997

https://www.boards.ie/discussion/comment/120873927#Comment_120873927

Exactly.

techman1

https://www.boards.ie/discussion/comment/120873717#Comment_120873717

Who is playing with numbers? you could say that about the cso and government agencies interchanging statistics like GDP and GNI to suit the narrative they are projecting.

As for the esri study released today saying that housing affordability is broadly affordable and similar to EU averages. Firstly it is heavily skewed by the high levels of home ownership by the over 40s. It is also skewed by very high levels of government supports in the rental sector whereby the majority of renters are receiving government supports which benefit the low earners and social welfare recipients.

However the squeezed middle are paying much more of their income on accommodation over 30% and this is more than their European contemporaries.

The study is also skewed by the fact that it is based on 2019 statistics, 4 years ago now and we know anecdotally that things have got a whole lot worse in the accommodation market since 2019

Flinty997

https://www.boards.ie/discussion/comment/120873514#Comment_120873514

When it comes to emigration it was harder in the past then today.

As for housing doesn't matter how cheap the house is if you can't get a job.

Having an expectation you will be able to afford to buy where you grew up, or where you were born is never guaranteed.

Granted the housing crisis is a different dynamic than in the past. But 80s Dublin was a bit of kip. It's a vastly different place now.

Stephen_Maturin

https://www.boards.ie/discussion/comment/120874340#Comment_120874340

Yeah but back then you could leave, get a job, earn money, come back and buy and house.

Now you can get a job here and earn but get nothing for it, or you can leave and earn and when you come back you’ll still get nothing for it. So why bother with Ireland at all anymore?

I’m amongst the last holdouts of my friends, I never wanted to leave Ireland and always envisioned my future being here.

More and more I’m beginning to reckon I’m a naive fool for staying - there’s nothing for me or other young educated professionals in this country. Get the bollocks taxed off me and absolutely nothing in return.

I love Ireland and would recoil at the idea of harbouring any bitterness towards it but it’s becoming increasingly difficult for me to deny that my country has turned its back on me.

I’m 28, I’ve a masters in biotech, I’ve a good job, my partner is a doctor specialising in haematology - we are the people that should be driving the economy and services in this country for the next 40 years, but there’s nothing here for us, so we’ll probably leave within the next year or so. Us and myriad others. Don’t want to come off as entitled but the two of us work bloody hard and should be able to get a decent house and start a family, but there’s no prospect of that in Ireland.

The social contract is broken, I’ve a horrible feeling the country has peaked and is staring down the barrel of a vicious cycle of brain drain, stagnation and decline. I really hope I’m wrong.

Beta Ray Bill

https://www.boards.ie/discussion/comment/120860982#Comment_120860982

Singapore and Luxembourg are city states, Ireland is not (Although it's a serious risk of becoming one)

Qatar and the UAE are rich cause of the natural resources they posses and those countries have "interesting" laws around what's allowed and what's not in terms of people and economics.

Ireland is completely unique in this regard.

The economy is all over the place, if you're established it's mostly grand. if you're not established and work in a sector that's not flooded with multi national companies (like being a Nurse, or Bus Driver or working in a a shop) you're basically goosed.

I've worked for a number of big companies in IT (where the good jobs are) and most of the people working there are not from Ireland.

Previously there has always been emigration from Ireland, but many of them come back at some point. The concern is now that they may not come back. There is huge Labour shortage as it is. We're definitely running very hot, we need to cool off a bit I think.

Wanderer78

joys of financialisation of economies, metrics that are used to measure the so called well being of your economy eventually become meaningless to a growing number of people, as long as certain asset markets, such as property prices, is maintained at all costs, nothing else matters!

Flinty997

https://www.boards.ie/discussion/comment/120874706#Comment_120874706

You're looking at it with the benefit of hindsight. They didn't know when they left they would be able come back. Many didn't come back..

We could have crash here in the next few years. There are no guarantees in life.

Murph85

https://www.boards.ie/discussion/comment/120874706#Comment_120874706

youre bottom of the heap! expected to fund everything and get nothing in return... Nothing ever changes in this country. Varadkar etc all too spooked to actually reform the welfare state, because of our heavily left leaning media , ngo's etc... The place offers you nothing, dublin city centre is a total disgrace, the infrastructure in the country is beyond a farce, law and order? LOL! now we have allegedly been a rich country for decades, you have paid in a hell of a lot of taxes, lost fifty percent of it over some pittance of a threshold, where the hell is all of this money? we have no military spend effectively, relatively very small elderly population, appalling infrastructure...

after all of the spate of attacks in north dublin city centre recently, expert there to be billions of euro in welfare increases. But wont fund a few more boots on the ground in these areas... total banana republic...

Flinty997

https://www.boards.ie/discussion/comment/120874837#Comment_120874837

Those people in IT not from Ireland. They've emigrated here. It's the same thing Irish people do...

The economy over heating was all the talk the last time.

maccored

https://www.boards.ie/discussion/comment/120873990#Comment_120873990

you is mixing with the wrong crowd. plenty of people have multiple jobs

DataDude

https://www.boards.ie/discussion/comment/120874706#Comment_120874706

I generally agree with your sentiments across the board. I see it with a lot of my friends in ‘normal jobs’ and it’s really tough.

But have to query, for you masters in biotech, assuredly working in Pharma. You’re surely earning at least €60k/70k+. Highly likely to be earning well over €100k fairly quickly if you are in any way effective.

Wife is a Doctor. Depending on where she is with that, on the lower end with OT etc. she’s earning €80k+. In 5-10 years she could be a consultant earning €200k basic for 35 hours a week and the potential to earn multiples of that in private practice.

So now you must have a household income of c.€150k. Buy yourself a nice €700k house.

5 years from now you’re earning €300k+ and you can upsize to a €1m+ house fairly comfortably?

Charles Babbage

https://www.boards.ie/discussion/comment/120873656#Comment_120873656

No doubt lenders have thought of this.

However, CT is 12.5% or 15%, and some of the gap between GNI* and GDP is taxed at this rate, which is why we have so much CT coming in right now. However, the government gets more from the indigenous economy from income tax, VAT etc, so not all of Irish GDP is taxable at the same rate. Which is why it is so hard to make sense of Irish economic statistics.

Ardillaun

https://www.boards.ie/discussion/comment/120873157#Comment_120873157

It is a problem with the age-specific distribution of home ownership in Ireland. Really, how big does Sinn Féin’s vote have to get before some people admit we’re in trouble with this?

Flinty997

https://www.boards.ie/discussion/comment/120877980#Comment_120877980

Curious where you are going with this.

What do you suggest doing so that less older people own their own house.

Padre_Pio

https://www.boards.ie/discussion/comment/120878017#Comment_120878017

Or maybe they mean more younger people own their house?

Flinty997

https://www.boards.ie/discussion/comment/120878026#Comment_120878026

So I'm curious how do you suggest giving preference to younger people.

Peregrinus

https://www.boards.ie/discussion/comment/120877939#Comment_120877939

Obviously, if IRL put the CT rate up to 50%, the volume of corporate profits available to be taxed would contract dramatically, and CT revenue would fall. Similarly, if we dropped the CT rate to 1%, while the volume of corporate profits available to be taxed would probably rise CT revenue would fall if the rate was as low as that.

It follows that there's a "sweet spot" where the rate is low enough to attract a large volume of corporate profits, but high enough to generate an impressive amount of revenue. And I think the evidence suggest that we must be reasonably close to that sweet spot.

The bottom line is that, evaluated purely in terms of revenue generation, our policy is works pretty well. We get much more CT revenue, both per capita and in relation to the "real" economy (measured by GNI*) than does the UK.

In other words, as far as fiscal policy goes, this is a responsible and successful fiscal policy, and it's part of a broader fiscal policy that does enable us to raise sufficient revenue to service our debts. Hence. lenders aren't spooked by our level of indebtedness.

I agree that not all of Irish GDP is taxable at the same rate but, if you think about it, that's true of all economies. Different taxes are levelled at different rates on different components of GDP, and some taxes aren't levied on any component of GDP (e.g. rates, property taxes, wealth taxes, inheritance taxes). I don't think there's any economy anywhere operating on the basis that all production is taxed at a flat rate. When you see tax/GDP ratios quoted, they are always an average across the economy which conceals wide variations in different areas and sectors.

Peregrinus

https://www.boards.ie/discussion/comment/120878060#Comment_120878060

You don't have to. As pointed out earlier in the thread, 80% of people over 40 already own their own homes, so the unmet demand for homes largely consists of people under 40. If you improve the supply of affordable starter homes, they will be largely taken up by younger people without any special measures needed to ensure that this is so.

(If desired or if thought necessary, the state could provide homes available only to people who don't already own a home.)

Padre_Pio

https://www.boards.ie/discussion/comment/120878060#Comment_120878060

I don't think anyone wants to give a preference. More like reduce the obstacles to home ownership to increase the % of younger homeowners.

I'm not sure how SF are going to fix the housing shortage, since the problems are not solely political.

I do think that Irish planners need to embrace the high rise, and each apartment complex should have a management company and HOA to enforce some minimum standards.

This is a topic for another thread if you wish to start one.

orangerhyme

https://www.boards.ie/discussion/comment/120878151#Comment_120878151

I actually think the tide will turn on the housing crisis in 2024. I've been looking at the data and the highest number of home completions since 07/08 will be in 2024. It's been increasing year by year also.

Of course our GDP is distorted and isn't a measure of the wealth of a country.

The measure of a country is the quality and access to education, healthcare, housing.

The cost of living relative to average salary.

Can people on minimum wage live normally.

Infrastructure, public transport, telecommunications.

How are old people looked after, people with mental and physical disabilities - are they integrated in society.

Is there equality for people of all genders, race, religions?

Do we have a free and independent media? Freedom of expression and assembly? Freedom to practice religion?

Do people feel safe? Do women feel safe?

Do we have a robust and fair criminal justice system?

Do parents let their children out by themselves once they reach a certain age?

Are children of different abilities given access to an education for their needs?

Do we protect our environment, natural spaces, biodiversity? Are our rivers, lakes, oceans being kept pristine?

And so on and so forth.

GDP is important though as a good economy gives us the money to provide the above.

America has one of the highest GDPs in the world but lacks equality, access to good education and healthcare.

It still has ghettos which are hard to succeed from. We have bad areas but nowhere near as bad.